The American Medical Association has established new principles to guide the development and operation of accountable care organizations, which emphasize physician leadership and patient participation.

The FTC, CMS and OIG hosted a public workshop on October 5, 2010, featuring panel and listening discussions on regulatory issues surrounding how the development and operation of accountable care organizations would be affected by the use of waivers, safe harbors and other exceptions to various fraud and abuse laws.

It has just been announced that interested parties who were unable to participate in person (registration closed almost immediately) may now participate via webcast in the October 5, 2010, public workshop hosted by the FTC, CMS and OIG to discuss various legal issues related to accountable care organizations (ACOs), including antitrust, physician self-referral, anti-kickback and civil monetary penalty laws.

On October 5, 2010, the FTC, CMS and OIG will host a public workshop featuring a listening session on various legal issues related to ACOs, including antitrust, physician self-referral, anti-kickback and civil monetary penalty laws. Registration for the workshop is currently closed, but the listening session is available to all.

The reimbursement models in the health reform legislation—including accountable care organizations, bundled payments and payments for quality—create powerful incentives for hospital/physician consolidation. Strategic options include hospital acquisitions of physician practices or other, usually contractual, forms of hospital/physician clinical and financial alignment. In addition, many non-governmental payors have implemented or are planning similar reimbursement initiatives, which will further reinforce the hospital/physician consolidation trend.

Your Next Moves

Hospital boards and senior managers should have as their first priority the development, and effective and rapid implementation, of a hospital/physician consolidation strategy appropriate to the realities of their markets. Leaders considering forming or joining a consolidated provider system should carefully analyze several factors at the next board meeting or strategic planning session. For instance, these consolidated provider systems will need the infrastructure, such as information technology, necessary to meet the reimbursement goals. Another key agenda item is whether the organizations have the financial strength to bear greater financial risk for the cost of care provided to patients.

A hospital’s fate, and, perhaps, existence, in the post-2015 world of fully implemented payment reform will depend upon actions taken, or not taken, in the next year.

Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate version (Patient Protection and Affordable Care Act), include provisions (House Section 1301 and Senate Section 3022) establishing Accountable Care Organizations (ACOs). ACOs are provider-centric organizations focused on the costs and quality of care received by a designated population of patients over time. ACOs can consist of vertically and horizontally positioned providers, including physician groups and hospitals. In its most basic concept, although paid on a fee-for-service basis, ACOs that meet quality-of-care targets and reduce the aggregate costs of care rendered to their patient population relative to a spending benchmark are rewarded with a share of the savings they achieve for the Medicare program.

What’s at Stake

Regardless of whether health reform legislation is passed, providers will be increasingly challenged to adopt operating models through which they are responsible and accountable for the quality, cost and overall care of a defined population of patients. Emphasis will be placed on clinical processes and outcomes, the patient care experience and utilization.

Steps to Consider

Evaluate why and assess those actions necessary to migrate from a financially driven model to a clinically integrated driven model if you previously operated a Physician Hospital Organization (PHO) that did not succeed.

Evaluate investments in infrastructure and redesigned care processes for high quality and efficient service delivery.

Establish appropriate committees to explore and evaluate adoption of clinical best practices.

Bolster capabilities to capture and report on quality measures.

Coordinate with other providers to facilitate the sharing of effective strategies on quality improvement, care coordination and efficiency.

Assess hospital-physician relationships and your ability to promote and sustain quality based initiatives.